The Tanzania shilling should remain under pressure in the first half but will rebound towards the end of the year as it is lifted by export earnings from gold and other commodities, a Reuters poll showed last week.
According to the median forecast of a survey of eight analysts, the Tanzanian currency will trade at 1,350.0 to the dollar at the end of March, then fall to 1,352.50 by the end of September. It should then rally to 1,315.50 by the close of the year.
Banks quoted the shilling at 1,349/1,355 last Thursday.
"The shilling will remain strained in the first half of 2010 due to a persistent imbalance between demand and supply of foreign exchange in the local market ... but the currency will benefit from a gradual pick up in mining through the second half of the year," said Leon Myburgh, sub-Saharan Africa specialist at Citi.
Tanzania's government sees economic growth rising to 5.7 percent in 2010 from an estimated 5 percent last year and expects inflation to be below its 6 percent target by the end of the fiscal year in June.
A Reuters poll, however, forecasts growth in east Africa's second-largest economy of 5.1 percent and predicts inflation will be above the 6 percent target due to rising food and fuel prices.
Tanzania is the third-biggest gold producer in Africa after South Africa and Ghana. It earned $1.1 billion from gold exports in 2009, up 15 percent from a year earlier. Tourism is still the country's leading foreign exchange earner.
"Tanzania's shilling is expected to remain range bound with some volatility in between. Tanzania is less integrated than other regional economies with the global markets," said AIG's Edward Gitahi.
"Currency movement is expected to emanate more from the balance of payments position," he said.
Myburgh said Tanzania's central bank was likely to stick to its limited currency interventions in the market.
The central bank said it pumped $560 million into the market in the first half of 2009/10 compared to $368.5 million in the same period a year earlier.
The shilling depreciated by 8.4 percent last year, despite frequent central bank interventions.
Bank of Tanzania said in its latest monetary policy statement that it would allow the exchange rate to be freely determined in the interbank market and only intervene to maintain its monetary policy goals.